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AIR updates Multiple Peril Crop Insurance Model for China

23rd September 2020 - Author: Katie Baker

Catastrophe risk modelling firm AIR Worldwide (AIR) has announced that it released an updated Multiple Peril Crop Insurance (MPCI) Model for China.

air-worldwide-logoThe product has been updated in order to support probabilistic assessments for five newly modelled crop lines of business and a newly modelled sub-peril. This update also includes a new livestock module that adds six additional lines of business and two new sub-perils.

Due to China being the leading producer of chickens, pigs, goats, ducks, and sheep, and is the fourth-largest producer of cattle in the world by head, the potential for livestock losses is considerable.

Because of livestock being so susceptible not only to extreme weather events but also disease, there is a potential for extreme livestock losses.

The AIR Multiple Peril Crop Insurance Model for China leverages a 10,000-year stochastic catalogue that contains losses reflecting the most recent assumptions regarding policy conditions.

RMS

The stochastic catalogue includes the addition of the heat sub-peril for all crops and the weather and disease sub-perils for livestock.

Mainland China has multiple climatic zones, ranging from subtropical to subarctic, and is subject to a wide range of weather events, which the updated model captures the effects of.

The AIR MPCI Model for China estimates damage to all of the country’s major crops with federal subsidies for crop insurance premium. The model simulates changes in crop vulnerability to damage, and resulting insured losses, that occur during the course of the growing season.

Dr. Jeff Amthor, assistant vice president, AIR Worldwide commented: “In 2011, AIR leveraged its considerable experience and success in modelling MPCI portfolios in the United States to develop a model for mainland China. Since then, the model has been updated several times to keep it current with the fast-changing Chinese agricultural insurance market. The MPCI Model for China captures the severity, frequency, and location of drought, flood, wind, frost, and heat events nationwide, covering over 90% of the weather-related crop losses.”

Yizhong Qu, assistant vice president, AIR Worldwide China added: “China is a leading global producer of wood and paper products; the country’s forests can be insured under the national crop insurance scheme and incur large losses not only from extreme weather but also fire, pests, and disease. In addition, livestock (including poultry) policies now make up about a quarter of agricultural premiums in the country and have a large potential for losses. To get a comprehensive view of agricultural risk in China, companies must consider the risk to crops, forests, and livestock.”

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